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Land Use Policy 27 (2010) 1010–1017

Contents lists available at ScienceDirect

Land Use Policy

j o u r n a l h o m e p a g e : w w w . e l s e v i e r . c o m / l o c a t e / l a n d u s e p o l

sing compensation instruments as a vehicle to improve spatial planning: hallenges and opportunities

enno van der Veen a,∗, Marjolein Spaans b, Leonie Janssen-Jansen c

Delft University of Technology, Faculty of Applied Sciences, Julianalaan 67, 2628 BC Delft, The Netherlands Delft University of Technology, OTB Research Institute for Housing, Urban and Mobility Studies, Jaffalaan 9, 2628 BX Delft, The Netherlands University of Amsterdam, AMIDSt, Nieuwe Prinsengracht 130, 1018 VZ Amsterdam, The Netherlands

r t i c l e i n f o

rticle history: eceived 3 September 2009 eceived in revised form 14 January 2010 ccepted 18 January 2010

eywords: arket-oriented compensation

nstruments

a b s t r a c t

Planners are increasingly adopting market-oriented compensation instruments. This is not only the result of a shift from government to governance, but also because governments are increasingly required to compensate private citizens for losses incurred due to planning regulations. Market-oriented compen- sation instruments have a broad scope as they also enable non-financial compensation opportunities. Non-financial compensation schemes normally use – not necessarily transferable – rights to compensate for a loss in economic value. Countries that adopt such instruments – such as The Netherlands, the US and Spain – often not only use them for compensation, but also to recoup some of the windfall profits

patial planning nternational comparative research ase studies

that are then used for the improvement of urban and regional areas. The benefits of these instruments are currently being debated and this article adds to the discussion by

revealing the circumstances in which non-financial compensation instruments make a useful contribution to the planning of tomorrow’s world. The assessment found that an instrument’s success mainly depends on its specificity, its capability to facilitate co-production and its capability of finding an effective balance between loss and compensation through rights. Although we generally present a favourable view of these

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ntroduction new instruments

At present, many governments are discussing and implement- ng innovative pro-market instruments in spatial planning. Many uthors argue that the role of the market in planning should e strengthened (Osborne, 2000; Jessop, 2002; Nicholas and uergensmeyer, 2003; Alexander, 2004) and this is in line with what s generally called the shift from government to governance. It is rgued that government authorities are no longer capable of giv- ng direction to spatial planning in the same manner as was done efore (Kearns and Paddison, 2000). MacLeod and Goodwin (1999, . 506) associate this phenomenon with a “relative decline in the

tate’s direct management and sponsorship of social and economic rojects, and an analogous engagement of quasi- and non-state ctors in a range of public–private partnerships and networks” Spaans, 2006). This shift results – ideally – in various types of

∗ Corresponding author at: Department of Biotechnology, Faculty of Applied ciences, Delft University of Technology, Julianalaan 67, 2628 BC Delft, The Nether- ands. Tel.: +31 15 278 6626; fax: +31 15 278 2355.

E-mail addresses: [email protected] (M. van der Veen), [email protected] (M. Spaans), [email protected] (L. Janssen-Jansen).

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264-8377/$ – see front matter © 2010 Elsevier Ltd. All rights reserved. oi:10.1016/j.landusepol.2010.01.003

ith a discussion of some of their drawbacks. © 2010 Elsevier Ltd. All rights reserved.

ooperation between public and private parties, whereby all play- rs jointly invest in an area using tailor-made arrangements that t both public and private goals. This in turn requires tailor-made

nstruments. In addition to this first trend we also distinguish a second: the

ncreasing need for governments to compensate parties with a ested right in property for losses that result from their planning egulations. As a consequence of this second trend, governments re increasingly obliged – or under pressure – to compensate andowners for their losses due to planning interventions. The solu- ion can be found in recapturing part of the extra value generated y an increase in development potential. As well as being used s compensation for the reduction of development potential else- here, the recapturing of extra value is also increasingly being used

s a source of finance for improvements to overall spatial qual- ty (Healey et al., 1995; Pruetz, 2003, p. 87; Cho, 2002; Day, 2005; ullingworth and Nadin, 2006).

The search for win-win solutions that address these trends

as led to the introduction of innovative instruments that involve on-financial compensation. The term non-financial compen- ation has its roots in agency theory, which accepts that in principal-agent relation, non-financial compensation schemes

uch as self-development opportunities for employees or other

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on-financial benefits such as a larger office or flexible work sched- les, will sometimes result in greater commitment by the agent han financial incentives. Non-financial compensation in spatial lanning means that a government does not subsidise or com- ensate landowners or developers financially for their losses or ndeavours but instead creates a right that can either be used r sold (Spaans et al., 2008). Under non-financial compensation e also include non-financial incentives. In such cases, a planning

uthority might provide an incentive for developers to realise cer- ain planning goals either on their own land or on the land of others. nstruments based on this concept require extensive negotiations etween public and private parties, while in some cases, existing sers and landowners in the area are also involved in the design of he instruments.

We view the non-financial compensation concept from the overnment point of view: the exchange between government nd landowners is non-financial. However, the exchange between andowners is financial. The instruments are designed with the

arket in mind as to have sufficient potential to balance demand nd supply and in so effectively creating a financial incentive.

Non-financial compensation as a policy concept does not exist – he term cannot be found in documents from any specific country however, it was introduced by the authors as a general category

o refer to various incentive and compensation schemes that make se of property rights rather than money to reward or compensate

andowners and developers for certain land use decisions. The term on-financial is mainly used as to distinguish this category from the

nstruments that involve financial incentives to favour certain land se decisions.

Using non-financial compensation as a concept enables inter- ational comparison between various policy instruments such as he ‘classic’ transfer of development rights (TDR) systems used in he United States and the Valencia model developed in Spain. The ook New instruments in spatial planning: an international perspec- ive on non-financial compensation (Janssen-Jansen et al., 2008) was he outcome of an international comparative research project in hich we asked authors to report on policy instruments that fit the on-financial compensation description. The reports were based n case studies carried out in six countries. General theoretical eflection, as well as reflection on these case studies, allowed us o discern some of the advantages of non-financial compensation nstruments. For example, these instruments – if designed prop- rly – are a useful tool by which governments can profit from the ynamics of the market and compensate for planning interventions hen government funds are lacking. However, this is only the case hen the instruments are tailor-made for the specific needs of a roject.

In this article we provide examples in which new instruments ere applied using the non-financial compensation principle.

he cases that are discussed below provide interesting additions o the planning toolbox. “Background to non-financial compen- ation instruments” section will introduce the background to on-financial compensation by examining the two trends intro- uced at the beginning of this section in more depth. We will also laborate the concept of non-financial compensation and the par- icular factors used in the assessment of the cases. In “Experiences ith non-financial compensation: cases from the US, Spain and the etherlands” section we will discuss three cases from the US, Spain nd The Netherlands in terms of three factors which are crucial o non-financial compensation. Finally, “Non-financial compensa-

ion instruments as tools for planners: some remarks” section will eflect on the findings, and also address some of the drawbacks of on-financial compensation instruments, such as the risk of instru- entalism, the lack of a long-term vision and the neglect of general

ublic interest.

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ackground to non-financial compensation instruments

In the previous section, we introduced two trends that under- ie the development of non-financial compensation instruments. hese were (1) the shift from government to governance and (2) he increasing need for governments to compensate private citi- ens for losses incurred due to planning regulations. In this section e will examine the background to these trends in more detail.

hift from government to governance

The general shift from government to governance has onsequences for spatial planning, which will become less overnment-dominated. Although this does not imply that govern- ents will no longer play an active role, established arrangements

or state interventions are being challenged and changed (Peel and loyd, 2007, p. 396). Both the government and governance mod- ls share the goal of “creating the conditions of ordered rule and ollective action” (Stoker, 1998, p. 17) and focus on the changing ontext of governing (Healey et al., 2002; Salet et al., 2003). Rather han losing power, governments are now changing their routines nd searching to create conditions for new collective action across he conventional organisational divides between agencies, sectors, reas and hierarchical levels (Stoker, 1998, p. 17; Gordon, 2006). ualini (2002, p. 33, emphasis in original) argues that “the challenge

or governing and managing action becomes that of co-production, f the pursuit of joint results from the activity and initiative of mul- iple social actors.” As a consequence, the planner’s role should no onger be focused on leading developments but more on facilitating hem. This is in line with the ideal scenario in which government nterference in planning is restricted to the regulatory tasks that nable the market to function properly. The trend is towards a ore stakeholder-driven, regional planning approach with fewer

xed mutual relationships (network governance) compared to overnment-steered planning systems (Micelli, 2002; Salet et al., 003; RPB, 2006). Nevertheless, governments sometimes would

ike to take more control. One of the arguments is that the cost avings provided by instruments whereby the government relies n market laws are only superficial, and governments usually end p paying for the unprofitable parts of the project while also los-

ng important powers enabling them to steer a development in a referred direction (Fainstein, 2001).

Stoker (1998, pp. 22–23) points out that the ultimate partner- hip in the governance model is a self-governing network, including he establishment of a level of mutual understanding and embed- edness in order to develop a shared vision and joint working rocess. The concept of governance embraces the ideal of network-

ng, as it starts with the idea that public and private parties have ifferent capabilities. In spatial planning, public and private parties ust work together in a way that is profitable for the market and hich benefits the general public more than a planning project led

y only one of the two sectors. The Dutch case Space for Space (see Netherlands: the Space for Space programme in North Brabant” ection) provides an example of such a partnership between public nd private parties.

ompensation for interference with property and the recouping of dded value

Rulings on takings in American and European courts – but

lso in other Western-based planning systems – are converging OECD, 2004), and require governments to compensate for their nterference in property rights. Theoretical reasoning based on the pecificities of the legal system has become less important than he idea of finding a solution for a case that does justice to its mer-

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ts (Eisenberg, 2000). This move results from the fact that ‘vested ights in property’ within a country are more important than the oncept of ownership. Therefore, users of property have found pro- ection under the European Convention on Human Rights (Council f Europe, 2003) (see below) that they would not have found under heir national legal systems. This obligation for compensation (that omes with all kinds of compensation systems) also aims to recoup alue from those who seem to profit more from the new regula- ion than would be just from the perspective of the community. ompensation schemes therefore often entail a duty falling on hose parties that profit from the new regulations to pay some of heir windfall profits to the government or to compensate those ho have suffered from the same regulations. The latter situation

an also be achieved by creating a system of development rights hereby the landowner who wishes to engage in development ust compensate the landowner who, due to the new regulations,

o longer has that option. In the cases discussed in this article we ill see examples of this mechanism.

lanners’ interference with property rights Government regulations that are considered to be too onerous

or an individual or a specific class of users or owners of property enerally lead to a duty to compensate such users or owners for heir losses. In the US the concept of ‘regulatory taking’ has existed or some decades. Jacobs (2008, p. 52) describes regulatory takings s:

a United States concept that speaks to the limits placed on government to engage in regulation of private property absent compensation to the land owner for regulation that is deemed to be too onerous. Put another way, regulatory takings is the idea that government regulation that is deemed to demand too much from the individual property owner in the pursuit of a public purpose entitles that property owner to some form of compensation from the public.

he American courts hold that three factors determine a regula- ory taking: the character of the governmental action, its economic mpact and its interference with reasonable investment-backed xpectations (Bruce, 1998, cited in Van der Veen et al., 2008).

The term ‘regulatory taking’ is typical for the US – ‘taking’ stems rom the Fifth Amendment to the Constitution – but the concept in tself is not alien to other legal systems. Jacobs (2008, 2009) warns hat if governments do not allot sufficient funds for the payment f compensation, this could eventually result in abstaining from lanning interventions. However, this does not mean that damages re awarded very often in Europe, the US or in any other country. government has the right to set rules in relation to property to

rotect the general safety of the public, and in relation to other ssues that concern the public welfare (Renard, 2008; Jacobs, 2008, . 62). Generally speaking, government regulations may violate a ested right in property and give way to a duty of compensation. enard (2008, p. 199) concludes:

Roughly speaking, most countries in Western Europe have adopted the principle that constraints on urban development are not subject to compensation (. . .). A constraint on the right to make use of a given parcel of land is not considered grounds for compensation unless it infringes a vested right such as with- drawal of a building permit already granted or a change in the previous statutes of the site resulting in direct, material and

indisputable damage to property. The latter comes close to a ‘taking’, and in fact rarely applies.

At the European level, citizens seem to have become more lit- gant. Article 1, Protocol No. 1 of the European Convention on uman Rights (ECHR) reads:

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Every natural or legal person is entitled to the peaceful enjoy- ment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the con- ditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.

The article is reminiscent of the US Fifth Amendment mentioned bove, which reads “(. . .) nor shall private property be taken for ublic use, without just compensation”. These provisions mean that se of land development tools and planning tools find their limit in he protection of the fundamental right to property (Groetelaers nd Ploeger, 2007, p. 1423). The OECD (2004) introduced three riteria which are used worldwide and which determine whether government must compensate an individual. These are (1) the

egree of interference with the property right, (2) the character f governmental measures, that is the purpose and the context f the governmental measure, and (3) the interference of the easure with reasonable and investment-backed expectations. In

ine with the OECD we conclude that comparable rules should be pplied in planning systems, obliging governments to compensate ersons with an interest in property when regulations are too oner- us for one person alone. If governments lack the funds for that ompensation or if it seems just that other persons who profit rom those regulations should pay for the compensation, non- nancial compensation instruments that provide compensation in ights and not in money may be adequate compensation tools. he exchange between government and landowners is thus non- nancial, although the exchange between landowners is financial.

ecapturing the added value of land Another side of the coin relates to recapturing the added value of

and. Value capturing can be seen as a means by which compensa- ion is gained from landowners for the added value of land resulting rom new planning regulations. On the basis of our research we see shift towards value capturing. The aim seems legitimate: if gov- rnments must provide compensation for their interference with he property rights of their citizens, it only seems logical that they ook for ways to have the citizens who profit from new planning olicies, pay that compensation, either directly or indirectly by aying a fee to the government. This recouping of value is given

egitimacy by the idea that a certain destination of property in land use plan does not result in a personal property right but

n a communal property right and that therefore the profits that esult from favourable zoning regulations should also be owned y the community (Fischel, 1985, p. 36). The elaborate land use eform theory developed by law professor Donald Hagman, called Windfalls for wipeouts’, is often used to justify this recapturing of rofits. The basic idea is that public agencies which issue regula- ions that cause a reduction in property value should compensate andowners for such ‘wipeouts’. However, at the same time, public egulations or other government activities that increase property alues should allow that value to be recaptured by the govern- ent: thus it recaptures the ‘windfalls’ that it creates (Hagman and isczynski, 1978). Other types of legitimation focus more on planning goals. For

xample, it is argued that recapturing value would result in more

istributive justice thereby reducing land speculation, and it might lso increase trust in governmental planning decisions and thereby educe growing public objection to new development (Janssen- ansen et al., 2008, p. 32). In the British system, for example, ecouping value has long been institutionalised through the instru-

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ent of planning obligations that require a developer to pay for acilities to mitigate the impact of the development. Planning bligations can be used as a way of securing improvements in nfrastructure and other facilities in an area, for example, to have he developer dedicate part of a site as open space (Booth, 2008, . 222). This is an example of a system in which several pos- ible mechanisms for regulating development costs and benefits etween individual and communal interests are used (Whatmore, 994), and in which governments can negotiate with developers oncerning the contributions to be made to improve the quality of development. Market actors often not only contribute financially

cost recovery, etc.) but also provide in-kind facilities. In this sce- ario, it is the market that provides public goods such as parks and laying fields. This increases the opportunities for the market to ecome involved in planning and in this respect it can also be seen s step towards co-production.

All these trends result in new types of planning instruments. he search for win-win solutions has thus led to the introduction f non-financial compensation instruments. We will elaborate on his concept in the following section, presenting some practices ith non-financial compensation instruments.

actors of success

TDRs, probably the best known examples of non-financial com- ensation, have often been accused of failing to offer solutions to lanning problems (Kaplowitz et al., 2008). Renard (2008, p. 204) tates that in France and many other countries TDRs have failed to ecome anything more than an aid to the implementation of a plan r a mere tool for compensation. A successful instrument, how- ver, would stimulate the creative productivity of the market and hereby realise planning goals that are not likely to be realised oth- rwise. Kaplowitz et al. (2008) offer some empirical material on the volution of TDRs. Over the years, the designers of TDR programmes ave looked for ways to make the instruments more popular by etter adapting them to local needs and encouraging people to use hem.

Earlier in this section, we discussed two trends that coincide ith the emergence of non-financial compensation instruments.

n “Experiences with non-financial compensation: cases from the S, Spain and the Netherlands” section we will describe three cases herein non-financial compensation instruments were applied. ased on the international case study research and in line with aplowitz et al. (2008), we argue that at least three aspects of

hese instruments determine a successful implementation: their ase-specific design (specificity), their capability to facilitate co- roduction, and their ability to find the right balance when loss of conomic value is compensated in rights.

The specificity requirement holds that a non-financial com- ensation instrument should be tailor-made and site-specific. In rder to achieve this, it makes sense to include stakeholders and hareholders in its design process, as they have – by definition

superior knowledge of the area for which the instrument is esigned. If shareholders and stakeholders are included in the esign process, the non-financial compensation instrument can

ndeed become more than an instrument of mere compensation. t can then also be successful in achieving planning goals that annot otherwise be achieved. Such instruments save money for axpayers as they use rights rather than money to compensate ggrieved owners. However, this is only the case if the rights can

e sold or used in an economically fruitful manner. Therefore the pecificity requirement coincides with the requirement of bal- nce. Specificity thus requires the instrument to provide a solution o the case in hand and fits the specific needs and goals of the rea.

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The requirement of co-production concerns the capability of the nstrument to bring public and private parties together in order o improve the quality of an area to a greater extent than each ould have done alone. Co-production requires public and private arties to do what they do best, focusing not so much on differences ut rather on capabilities. Co-production can therefore be seen as sub-trend of governance that is of specific interest to planners.

n this context co-production does not necessarily require private arties to be part of the design of the project – although under most ircumstances it will be advisable – it rather asks for instruments o enable all parties to operate in the way that suits all needs best. n example hereof is the undertaking of a background study by the ommunity and the number of initiators (Kaplowitz et al., 2008).

Thirdly, the success of a non-financial compensation instru- ent depends on the balance between the right gained and the

conomic value of the compensation. The right gained should be orth enough to be regarded as fair compensation for the loss of

he vested right. However, the rights should not be worth too much. e also include the notion of transaction costs here; it should not

e too difficult to obtain a right since this may affect the just com- ensation that it ought to provide. Kaplowitz et al. (2008) conclude hat the establishment of a TDR bank (that buys the rights from he sending area when the market is slow) in combination with he existence of a system of Purchase of Development Rights is he most successful. TDR and PDR programmes are not exactly the ame: in PDR programmes funding generally comes from grants or ax revenues and the development rights are not transferred but imply retired. Conversely, in TDR programmes the development ights that are transferred from sending to receiving areas, are not unded by grants and taxes but by the developers of the receiv- ng sites who acquire greater development potential, and therefore otential profit by voluntarily using the TDR option.

xperiences with non-financial compensation: cases from he US, Spain and The Netherlands

This section will present three examples of non-financial com- ensation instruments. The cases are located in the US, Spain and he Netherlands, three countries which have different planning ystems and different approaches to property. In all three coun- ries, innovative instruments have been introduced to avoid direct overnment financing of compensation to property owners. The ases are discussed at greater length in Janssen-Jansen et al. (2008) here, as mentioned above, the contributing authors reported on on-financial compensation instruments in six countries. As we sked for case studies in which examples of non-financial com- ensation were actually implemented, one may speak of a relative uccess. By choosing such cases we were able to evaluate all phases f the case. To overcome some issues of comparability, a standard- sed approach was used in each case. For each country we asked he contributing author to sketch the planning context in which he selected case studies take place and describe the case studies n accordance with a strict format. For this purpose use was made f policy and research documents and in some cases additional nterviews with key actors. The cases were discussed amongst the uthors in order to make them comparable. Three of these cases ere selected for the purpose of this article.

S: transferable development credits in the city of Malibu

In the city of Malibu, located in Northwest Los Angeles County, Transferable Development Credits (TDC) system was successfully

mplemented to prevent further development along the vulnera- le beaches in the area. The TDCs are found in chapter 7 of Malibu’s

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ocal Coastal Programme/Local Implementation Plan. The stated urpose of the system is “to ensure that no net increase in den- ity would occur within the environmentally sensitive areas of the ity in two zoning districts: the Multiple Family (MF) district and he Multi-Family Beachfront (MBF) district. This is accomplished by etiring rights to develop on certain other parcels in the Santa Mon- ca Mountains Area coastal zone from private property owners” Putters, 2008, p. 154). The successful reduction in development n the environmentally sensitive Santa Monica Mountain Area as a esult of the programme contributes to the increase in the overall uality of the area. The result was the preservation of nature.

The system works as follows: if a landowner in one of the wo zones wants to subdivide his/her land in order to build more wellings, he/she has to purchase credits from donor lots in a send-

ng area and enter into a purchase agreement with the owner of the onor lots in the sending area. The city of Malibu then receives an ternal easement on the donor lots, which means that the parcels ill not be subject to any further development.

pecificity The TDC programme has a specific goal – it aims to protect

he Santa Monica coastal area. The regulations are therefore very recise. For example, donor lots in the Environmentally Sensitive abitat Area have to be located within 200 feet (61 m) of a park. In ddition, the landowner of the receiving plots has to seek approval or the subdivision of his/her parcels from the planning commission nd then has to apply for a Coastal Development Permit. The lat- er procedure includes a public hearing for owners and occupants ithin a 500 feet (152 m) radius. The system therefore seeks to find balance on a case-by-case basis between the interests of the com- unity and the landowner, and the general interest of protecting

he coastal area from further erosion and fire.

o-production The TDC instrument falls somewhat short from the perspective

f the ideal of co-production. The instrument is carefully designed o have the market pay for the conservation of the Malibu coastline. owever, the system thereby also becomes somewhat arbitrary as

t depends on the willingness of the owners to sell development ights to the individuals who own land in the receiving plots. Sys- ems in which a TDC bank or the government itself buys rights or a fixed price, sells them and then – in the case of any profit – einvests the proceeds in the sending area might do better from a o-production point of view. Such a bank could also provide some elief to the landowners in the receiving zones as it could relieve hem of the responsibility of looking for owners in sending areas ho are willing to sell their credits.

alance: rights and compensation The TDC system depends on the willingness of parties to buy

nd sell, and therefore market forces set the price. In fact, as owners n sending areas are not under pressure to sell their development ights, market forces have to do the work. However, Putters (2008, . 157) reports that the system might be somewhat ‘underused’ as he responsibility of finding an owner in the sending area who is illing to sell lies with the landowner in the receiving area.

pain: Francia Avenue in Valencia

In Valencia a non-financial compensation instrument was used

n the redevelopment of the area around Francia Avenue, the most ignificant redevelopment project in the city of Valencia in the last ecade. A former industrial area situated between the port and the ity centre was redeveloped for residential and commercial pur- oses and became a completely new neighbourhood, with new

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treets, plazas, parks and a bridge. There were 170 different build- ngs in the area, some of which were factories that were still in se. Land readjustment was used to create the new neighbourhood, ith landowners having the right to choose between selling their roperty to the municipality or the development agent (see below), r receiving development rights in the adjusted land scheme.

A competition was held to choose a developer for the whole roject – the so-called developer agent. Unexpectedly, most

andowners chose not to sell their land to the developer agent, but o receive development rights in the new project. This meant that hey received smaller but more profitable parcels within the project rea, as one of the basic rules of the project was that all landowners ad to make a net profit. However, at the same time, the landowners ad to pay the costs for public infrastructure proportional to their evelopment rights, including those for the sewage system, roads, treets, gardens and other public facilities. The land for the public acilities was transferred to the municipality, as was a minor part of he developable site to support the municipality’s public housing olicy.

In this way urban reallocation was created. Ultimately, a large hare of the land was allocated for public purposes, including a ery large park, infrastructure, etc., while only a small share of the and is used for the footprint of the 130 privately owned build- ngs. The restructuring of this area has led to a regional legislative mendment and resulted in what has been called the Valencia odel. Simplification of the procedures which regulate agreements

etween landowners, as well as between landowners and the unicipality, and the introduction of a development agent are cen-

ral to the model. The development agent is the driver of the process nd takes the initiative for the first phase of the development of a ite. Landowners are forced to pay the costs of development but are iven construction rights in exchange. The focus in this case was n the better organisation of a large-scale renewal project rather han the typical emphasis on an increase in density. This experi- nce inspired the Valencia legal reform of 1994 and further inspired egional legal reforms across Spain. Generally speaking, there are wo models with which these cases are tackled. In the first model, developer agent is chosen in a public competition open to non-

andowners but in which owners have some say. Another variant s the 50%-claim-the-title system in which the owner or owners of

ore than half of the total surface of the pool have exclusive rights o manage land readjustment (Blanc, 2008, p. 98).

pecificity Francia Avenue was a very successful case which inspired the

alencia legal reform of 1994 and a national law of 2007. Specificity s certainly one of the most attractive aspects of this model. The ompetition element of the land readjustment model requires the eveloper agent to make a specific and detailed plan that suits the eeds of the area. The 50%-claim-the-title system also guarantees hat such a plan is produced, but with the existing landowners act- ng as developer agents. In all cases the municipality is responsible or providing planning consent for the general plan.

o-production As the case depends on cooperation between the municipality

nd the developer agent, it is a good model of co-production. The unicipality obliges the landowners to pay for the public facili-

ies in the new neighbourhood, receives a small portion of land for ublic housing and oversees the general plan. The developer agent

s responsible for the development of the area and the implemen- ation of the scheme, by which landowners construct their own uildings on their own land. The net profit requirement ensures hat the interests of the individual landowners are no less impor- ant than the interests of the developer agent and the municipality.

Use P

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S

o n w r a e L t d

C

t m p

t t s n t W d a

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hus, the system guarantees that all public and private interests are et and that public and private actors cooperate in the implemen-

ation of the project.

alance: rights and compensation As the basic rule of the model is that all landowners should

chieve a net benefit from the plan, development rights are gen- rally considered as fair compensation for having to give up the riginal parcels. Blanc (2008) reports that the method is not often hallenged in courts. The few cases that come to court usually con- ern individual landowners who feel that they have not received ufficient compensation. Landowners who decide not to participate n the land readjustment scheme receive full financial compensa- ion from the developer agent on behalf of the municipality when hey sell their plots.

etherlands: the Space for Space programme in North Brabant

In The Netherlands, an interesting case is provided by the Space or Space programme (Ruimte voor Ruimte in Dutch) in the province f North Brabant. The aim of the project was to achieve a qual- tatively better arrangement between urban and rural areas by

eans of a system of conversion whereby high-quality houses built n large parcels of land finance the demolition of pig stocks. The omentum for the project was created by the European Union’s

ew nitrate guidelines, which required that phosphate and nitrate missions be reduced. To address this issue, the Dutch national gov- rnment focused on reducing the intensive livestock production of igs, encouraging farmers to terminate production by buying their hosphate and nitrate emission rights. This programme aimed to hen demolish the disused pig stocks on intensive livestock farms nd also to add a spatial dimension to the process of agricultural econstruction. In addition, the programme made it possible to pro- ide an additional financial incentive, above and beyond that set y existing regulations, to farmers willing to cease producing pigs. t the same time, the quality of the countryside was improved by learing the landscape of vacant pig stocks which were considered o be unsightly. The rural areas in question were cleared of build- ngs, preventing a situation in which they were used for undesirable ctivities, such as those associated with car dealerships and stor- ng unused caravans. Research has shown that the realisation of igh-quality housing on these three types of receiving locations ontributes to an increase in the overall quality of the area, for xample in situations where an unsightly urban fringe is comple- ented by housing on large parcels (See Fig. 1) (Mulders, 2003; De

ong and Spaans, 2009).

pecificity The programme is specific and tailor-made. The conditions, laid

ut in the provincial regional plan, are clear and fit the specific eeds of the players involved. Four types of demolition locations ere distinguished as well as the requirements of the building and

eceiving sites. No precise location was designated for the sending reas or the receiving areas; there is only rather vague zoning. Nev- rtheless, the conditions that need to be fulfilled are very specific. ocal tailor-made solutions were preferred for each of these loca- ions, for which municipal and private initiatives were the point of eparture.

o-production The regional conversion process is collaboratively organised in

he form of a development bank. This Space for Space Develop- ent Company is a public–private partnership in which five private

artners (developers and financial institutions) work together with

t b s l t

olicy 27 (2010) 1010–1017 1015

he province. If a farmer cannot build the ‘compensatory’ residen- ial unit on the demolition site, for example because it concerns a ensitive natural area, the farmer may sell the building opportu- ity to the development company. The development company can hen use the opportunity on a receiving plot (Janssen-Jansen, 2008).

hile the requirement for the receiving plots has been intensely ebated by stakeholders or their representatives, until now dis- greements have not been taken to court.

alance: rights and compensation The programme works as follows: demolishing a certain num-

er of pig stocks (and selling the phosphate rights related to them) reates the opportunity to build high-quality housing on large arcels of land. The area-oriented approach was laid down in a ational agreement, with the Dutch national government approv-

ng the proposal that the provinces allow additional high-quality ousing to be built on large sites. For the province of North Bra- ant, the maximum was set at 3000 parcels (Janssen-Jansen and ulders, 2005). The balance turned out to be correct as sufficient

umbers of farmers were encouraged to participate and cease pro- uction. As a consequence, the Netherlands was able to meet the U Nitrate Directive.

on-financial compensation instruments as tools for lanners: some remarks

We have introduced three factors which we consider important or a successful implementation of non-financial compensation nstruments. These factors were ‘specificity’, ‘co-production’ and he ‘right balance between rights and compensation’. On the basis f these factors we presented three examples of non-financial com- ensation programmes in the US, Spain and The Netherlands, and iscussed the existence and popularity of non-financial compensa- ion instruments according to these factors.

With respect to these factors we take a favourable view on non- nancial compensation instruments. We conclude that if they are arefully designed and meet the three requirements, they can save axpayers’ money and are capable of achieving planning goals that re beyond the scope of mere regulation. One of the reasons for his is that non-financial compensation instruments are open to he ‘dynamics of the market’, an example being the Space for Space rogramme. This programme links receiving and sending areas in he design of the project, requires cooperation between public and rivate parties, and depends on market demand for its success (and he cooperation of local governments).

Nevertheless, these aspects of non-financial compensation nstruments also have drawbacks. The specificity of instruments

ay result in forms of ‘instrumentalism’ that conflict with the rule f law (Janssen-Jansen and Salet, 2009). By instrumentalism we ean that instruments are created that are often not meant to be

sed in a general approach to planning (such as a land use plan) ut to solve a specific problem or class of problems. We encoun- ered various instruments that were created for one specific case nly, for example the Dutch Space for Space programme. There s obviously much to gain by using instruments that fit a spe- ific case, but there are also some risks. As the instruments are ade for specific cases, general legal and democratic principles ay be lost in the design (as happened in the decision-making

rocess on the Space for Space programme). Two examples of

hese drawbacks are firstly that some interests which should have een included were not part of the decision-making process, and econdly that non-financial compensation instruments are often abelled as exceptions or experiments and as such are not subject o sufficient democratic control (Einig, 2005).

1016 M. van der Veen et al. / Land Use Policy 27 (2010) 1010–1017

ncept

a a e r u u r 2 t i p s ( m i

c i i c i t i n a d

i t t m e a o d l

i i t a m w

R

A

B

B

B C

C

C

C

D

D

E

E

Fig. 1. Space for Space co

Non-financial compensation instruments are often designed as result of negotiations between public and private parties. They

lso depend on the negotiating power of the various groups. As xisting landowners and users often lack sufficient funds to be epresented by a professional negotiator, their interests may be nderrepresented. The latter may be a reason why the claims of sers and landowners have been relatively successful in those cases eaching the European Court of Justice (Groetelaers and Ploeger, 007). It is apparent that such interests had not been sufficiently aken into account during the negotiations, which thus resulted n contested cases. Furthermore, although public parties are sup- osed to negotiate on behalf of the general public, there is a lack of pecific democratic procedures with respect to these negotiations Camacho, 2005). Consequently, the interests of the general public

ay be overlooked when the instrument is designed to serve the nterests of the parties involved.

Instrumentalism and the pro-market design of non-financial ompensation instruments may result in government policies and nstruments that become dependent on trends in the market, leav- ng little room for long-term visions. As a result, due to their omplexity, it may be difficult for the general public to assert its nfluence. This disadvantage is also related to the scale at which he instruments are used. In the Dutch and American cases, the nstruments were used at a regional level, coupling areas that were ot physically related. This makes the instrument in itself complex nd it becomes difficult for those who were not involved in the esign of the instrument to understand its functions.

Despite these disadvantages, non-financial compensation nstruments may be useful to planning authorities. We emphasise hat these instruments – in order to work optimally – should find he right balance between general legal principles and a tailor-

ade design. Non-financial compensation instruments should

merge from an open discussion in which the general public can lso take part, and they should not be labelled as experiments r exceptions, as is often done to circumvent existing laws and emocratic procedures, but rather be embedded in the general

egal and planning systems. Finally, non-financial compensation

F

F

. Source: Mulders, 2003.

nstruments should only be used for as long as a specific project is mplemented, because as soon as they become ‘as-of-right systems’ hey lose their function and become ‘tax toys’ (Jacobs, 2008). Under ppropriate circumstances, a non-financial compensation instru- ent may be a useful instrument for the planning of tomorrow’s orld.

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